China Starts Easing Monetary Policy

November 30, 2011 12:41 AM

What Traders are Talking About:

* China starts easing monetary policy. The People's Bank of China announced bank reserve requirements will be lowered by 50 basis points, effective Dec. 5. This is the first "official" easing of monetary policy, although it follows a similar cut to reserve requirements for five rural banks in the province of Zhejiang early last week. With signs China's economy is slowing amid pressures from the euro-zone, expectations are additional steps to ease monetary policy will come in 2012.

The long and short of it: Most markets responded favorably to the news this morning, as easing monetary policy would free up more funding for commodity imports. But if China's economic growth slows aggressively, it would deter commodity imports.

* Euro-zone finance ministers agree on some added steps, but concerns linger. Euro-zone finance ministers on Tuesday agreed to leverage the EFSF bailout fund so it can help ailing economies if needed, but there were no agreement on how much the bailout fund would be ramped up. The finance ministers also said they may turn to the IMF for additional funding if conditions worsen in key countries, specifically Italy. Also, the finance ministers agreed to release the next tranche of financial aid to Greece and Ireland.

The long and short of it: Fiscal uncertainty in the euro-zone remains high and continues to act as a wet blanket over the investment world.

* Rumor: Argy corn into U.S. Southeast next spring. A rumor surfaced yesterday that end-users were looking to book Argentine corn shipments into Wilmington, North Carolina, for delivery next April. While unconfirmed, some industry sources say the prices "pencil out," so there could end up be some validity to the rumor.

The long and short of it: Foreign shipments of feedstocks have been shipped into Wilmington in the past as it's sometimes cheaper to import into the Southeast than transport supplies from within the U.S. -- especially when supplies are tight.

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